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Level Leverage decisions and manager characteristics

Author

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  • Margarita Carvalho

    (NIPE, University of Minho)

  • João Cerejeira

    (Department of Economics/NIPE, University of Minho)

Abstract

This study assess how manager’s characteristics may influence leverage decisions. Using data from European banks, the results show that younger managers are risk-prone and less conservative in leverage decisions. Moreover, it is observed that for higher levels of leverage more experienced managers tend to increase leverage. This is also true for managers with a longer tenure as they may bring their personal preferences towards risk and in this sense they will be more able to increase leverage. However, this effect differs according to the level of leverage at the manager’s appointment date. The inclusion of the decision horizon seems to validate the idea that a short-term managerial horizon enhances the self-interested behaviour of the manager and this may be reflected on capital structure decisions.

Suggested Citation

  • Margarita Carvalho & João Cerejeira, 2019. "Level Leverage decisions and manager characteristics," NIPE Working Papers 09/2019, NIPE - Universidade do Minho.
    • Handle: RePEc:nip:nipewp:09/2019
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    Cited by:

    1. Ziyang Li & Qianwei Ying & Yuying Chen & Xuehui Zhang, 2020. "Managerial risk appetite and asymmetry cost behavior: evidence from China," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 60(5), pages 4651-4692, December.

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    More about this item

    Keywords

    Quantile Regression; Banks; Capital Structure; Manager’s characteristics;
    All these keywords.

    JEL classification:

    • C21 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G41 - Financial Economics - - Behavioral Finance - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making in Financial Markets

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